Sigma Ltd produces and sells product X. Following the latest market research, the marketing director anticipates increased demand for the protkict for the year 2020. The director believes that sales will be 50,000 units in June; 56,000 in July and 70.000 in August. Thereafter, demand is expected to increase at a rate of 10% per month until Noveniaer 2020. At that point, it is expected sales will remain at the November 2020 level thereafter. Selling price aid variable costs of producing each unit of X is provided in the table below. It is expected that selling price and costs will remain stable in the foreseeable future. Product X Email; Selling Price 130.00 W Direct Material A ([5 per kg} 30.I'.IJ Direct Material B {3 per kg} 6.00 Direct labour (15 per hour} 60.03 Variable production overhead [2 per direct labow 8 00 hour} ' The cost accountant of the company has provided the following additional information. ' Company policy is for closing inventory of finished goods to be equal to 20% of next month's budgeted sales and for closing inventory of materials {A and B) to be equal to 25% of next month's usage [production requirements]. On May 311, there were 10,000 units of X; 76,800 kg of materialA and 25,600 kg of material B on hand. ' Other costs include the xed manufacmring overhead which is [$11,000 per month including depreciation charges of 60,000. Fixed selling and administrative costs amomt to 500,000 a month. ' All of the company's direct labour are on zero hour contracts and are therefore only paid for their actual work. ' The company takes one month to pay for all its overheads {fixed aid variable) and takes two months to pay for its purchases of materials A and 0. Direct labour is paid in the month the work is undertaken. ' Cash collected from sales for a month are as follows: Thirty per cent {30%} of a month's sales revenue are received the month following the sale. Fifty per cent (50%] of sales are collected two months follow'mg the sales and the remainder, (20%), are cash sales. Sigma Ltd allows a 2% cash discount on all its cash sales and the company does not anticipate any bad debts in the foreseeable future. ' Due to increased demand, the company is planning to purchase new equipment for 3 million cash in August 2020